How to Pay off Your Mortgage Early
This is a guest post from Mr. CBB at Canadian Budget Binder
Paying off your mortgage early is a lofty goal, but it can be done. My wife and I are in our mid 30’s and enjoy each day as it comes our way. Like most people, we went to school (in fact, both of us graduated twice in different fields).
I moved to Canada in 2007 from the UK and although I often think of what I miss (mainly family, proper yogurt, cheese and fish & chips), I’m grateful for the opportunities given to me here in Canada.
I was very cautious with my money from a young age, as my parents taught me that I had to work for what I desired. Success was only a part of what I wanted out of life and this is when I began to understand the meaning of “paving the way”.
I bought my first home at a very young age with money I had saved, then went on to purchase a second and third home. In Canada, I ventured into coupons. We are stocked up on almost all “essential to us” non-food items for a good few years (some will likely last up to 5 years).
Canadian coupon savings were part of our “pay down the mortgage” plan, and the savings will continue to fund other adventures in our life.
Living a minimalistic life to save money for your future (or to achieve your goals, such as becoming mortgage free) is not a bad idea, as long as you balance it with the present.
Enjoy your life now because money isn’t everything, unless you plan to be buried in it. In order for our budget to balance, my wife and I both work together to make sure we spend less than we earn.
I save my allowance if I want beer or coffee, and pay cash for tools and gadgets we need (okay, I need). We both enjoy shopping for bargains and will jump at the chance to get something free, but we also like to give back to those in need.
My best financial tip to pay off your mortgage early is to budget – but this is only part of an overall umbrella of personal finance.
These are the top ways we paid off our mortgage early:
Budgeting
Set up a budget so you know where your money is going, and always pay yourself first.
Coupons
Use coupons whenever you can to save money. Use that money to pay down your mortgage.
Extra Mortgage Payments
Dump extra money on your mortgage or make extra payments each month or year. Pay your mortgage weekly or bi-weekly.
Making Extra Money
Participate in focus groups, online surveys and rewards programs. Sell things. Do what ever you can to pocket some extra cash. Make money online or outside the home.
Cook From Scratch
Buy less convenience type foods, grow a garden if you can and cook homemade meals. Even freezer cooking has helped many families save money.
Spend Less Than You Earn
Hang out with like-minded people and don’t spend money you haven’t yet earned. This is very important, especially if you are easily swayed into spending money you don’t yet have or simply spending because you want to be “just like everyone else”.
We are in the process of paying our mortgage off early right now and are thankful everyday for the frugal living lifestyle we choose to live.
So, although you may think that you will never pay your mortgage or debt off early, take a moment to educate yourself, set goals, get organized and start a budget today.
Anything is possible.
Mr. CBB is the voice behind the blog at Canadian Budget Binder. He can be serious, passionate and a bit quirky, but loves his fans and helping others save money. You may also find him whipping up a meal or treat in the kitchen or posting his shops in The Grocery Game Challenge. Join him daily on Facebook, Twitter and Pinterest.
Comments
I want to expand on this topic.
My spouse and I are in the middle of purchasing an investment property. I am 26yrs old and we will have our first home paid off in 6 1/2 yrs. When we purchased our first home, our interest rate at the time was 5.75% (the rates were high in 2008). After we received our first mortgage statement, we were sickened at how much of our payments over the 1st yr went towards interest. We called up our mortgage company (ING Direct, who is AMAZING at allowing you to pay down your mortgage fast and tracking every payment online). We upped our mortgage payment from $450 biweekly to $650 biweekly. That knocked off 5 yrs from our amortization right there. Last year we decided we still weren’t paying off our mortgage as quick as we wanted, so we called ING and paid the penalty to cancel our existing mortgage at 5.75% and got the variable rate they were offering at the time (Prime minus .75). We are now paying only 2.25% and in 1 short year, paid off $20,000 off of our principal amount (after the term we will be saving over $21,000 in interest. Our mortgage company also allows us to pay up to 35% of our original amount once a year in a large lump sum (on top of our extra biweekly payments). If anyone is interested in more information on how to calculate etc, I am here to help (no I am not a mortgage person, but I am a Realtor and I know where to find the tools that you need) 🙂
Wow, that’s good for you!! We bought in 2009 when the rates were coming down although they went down even further. We will be breaking our mortgage in the New Year and paying the $2600 penalty to pay it in full. Like you we were sickened to see how much interest we were paying. It motivated us to cut the budget but still have fun whilst paying it down. We paid extra every month and saved on the side. Was it worth , you bet. I look into ING if we buy an investment house another topic for Mrs.CBB and I as we would like to be landlords as well. So many options open up in life it’s great! I’d like to learn more about ING if you want to get in touch with me that would be lovely. Cheers Mr.CBB
Hi Kodi, I was really encouraged after reading your comments. We recently bought our first home but we endeavour to pay it off early. We need all the help you can offer. Please dont hestitate to offer any. Thanks
Hi Angela, my email is [email protected]….by all means I am not an expert at mortgages, but I can send you in the right direction of how to calculate the difference it makes by weighing your different options etc, just love to help people save money 🙂
Thank you for sharing this information! One of the best things you can do for yourself is to pay off your mortgage early. It is well worth living on a smaller budget in the short-term in order to have long term gains. My husband and I lived on a small budget (but still with room to enjoy ourselves) and paid off our first mortgage in about 5 years. We lived mortgage-free for two years, and then made a move to our larger, long-term home in which we were able to be mortgage-free within a year. Essentially, we were living off of one of our incomes and using the other for mortgage payments and savings. Knowing that we own our own home is providing us great peace of mind about our future and that of our children.
Hi Mariane,
That’s great that you were able to pay off your mortgage so fast. Like you Mrs.CBB and I have contemplated moving to a bigger home but not at the moment. The hard part is knowing we will have a mortgage again. I think once I move up in my new career and know what direction I’m headed that will offer more vision for us. Thanks for your comment and sharing your success! Mr.CBB
I like this article. Paying off your mortgage early IS possible. It is all about disclipine. Like the author, I have always been careful with my money. This is not to brag but we were able to pay off our mortgage in 5 years. So at age 35, we are mortgage-free and have 2 kids. Just last month I applied for the TD VISA infinite credit card…the bank called and said I had to PROVE that I have no mortgage before they will approve my application. They said it’s NOT too late to change my answer about no mortgage. I was shocked and told them so. Regardless, since I really wanted the “travel” credit card I showed them my statements. This goes to show that banks don’t believe anyone under 35 can be mortgage-free. GRRRR…
BTW, we do not make big income or close to six-digits. We’re a one income family and we do live! My kids (5 and 1 year), have already been to numerous places/countries. Now that’s we’re mortgage-free, that “extra” cash can go to savings, travels, and anything else we want. So we are living a good life! Anyone of good health can achieve this.
This is what I LOVE to here because it is possible. If you would like to share your story on Canadian Budget Binder get in touch with me. I always like to showcase those that did save to pay something off and how they did it. It’s all about sharing, learning, and understanding rather than bragging. It’s never that, you are proud and you should be! Congratulations!! Mr.CBB
Clearly I’m not awake… hear not here 😉 oops!
We too paid off our mortgage early, in 5 years on a single income with interest rates at 11.5%! It can be done if it is a priority. Nor have we had car payments since about then. For comparison, our home value was about double my husband’s salary at the time. We have always saved 10% as well for things like a new roof, replacing vehicles, and some likely went toward the 10% down.
It helps that we had a 34% downpayment, did not overbuy/overmortgage at the rate the bank said we could have afforded (seriously, I’d love to see a budget they make up on that amount!), paid weekly, doubled up on our payments the first year as I was collecting unemployment and had a short term job-any extra was mine to spend (which didn’t amount to that much-paid for a bit of dental work), always paid the 10% down we were allowed yearly.
We had 2 kids during that time as well but live a very frugal lifestyle, still do. We really don’t eat out, ask for clothes for Christmas gifts, clothed the kids in hand-me-downs or mainly Eaton’s balloon days bargain racks (and didn’t overbuy), had the same furniture that we brought into the marriage (actually still have some 26 years later!). We still don’t spend money needlessly and are basically homebodies.
I’m quite certain not having kids in hockey through the years allowed us to make a yearly family trip to Disney most of the past 15 years–a very frugal Disney trip but a trip nonetheless. Basically that has been our big extravagance and memories I wouldn’t trade for anything!
I have a dream home planned in my head…but the thought of having a mortgage once again, even though we could easily afford it, does keep one from jumping into anything! That and I don’t think Mike Holmes has time to build it…and how on earth do you find a contractor who doesn’t cut corners at every opportunity!
Good for you! One really has to be focused at the goal here especially if paying off their mortgage is what they want. Like you this is not our dream home but it does almost everything we wanted when we went looking. Mainly a bigger plot of land is what we would be looking for but is it really worth taking on a new mortgage. I understand where you are coming from about the dream home. Thanks for sharing your story! Mr.CBB
I always do 25% down for personal comfort (and its a like round number). I have learned with my most recent home that weekly payments is a small step better than bi-weekly. Variable beats fix interest rates 90% of the time in the long term. And I have a a 35 year amortization but I over pay to be done in less than half that time, but still have the flexibility to pay the minimum if a job loss or something unexpected happens. When paid off, you can take out another small and affordable mortgage on that paid off house (as mortgage interest is less than a LOC), and invest the money and the interest will be tax deductible. Becareful though as this is leveraging and can carry risk depending on the investment
Hi Dennis,
I believe we put around 30% down on our house but we didn’t put all our savings down as we didn’t want to lose all the liquidity. Our house can now sell for around 100k more than we bought it for which is great but again is it worth it to get a bigger home with another mortgage. Questions we can only answer I suppose although we are very happy here at the moment. Besides bigger home means bigger everything else and more work. is that similar to the Smith Manouver what you are talking about?
I’ve become bolder over time when people complain about how much they’ve paid on their mortgage and how little the principle has dropped, explaining the basic math behind it and how much of a difference an extra $20 or $50 a month can make on a 30 year!
We are on track to pay off our place in 5.5 years total. Woohoo!
I think the timeframe is just so long on mortgages that most people seem to take it as a given and not even realize how expensive all that interest will be.
Hey Anne! Thanks for dropping in to read and comment on my guest post mate. That’s awesome news that you will have your house paid in 5.5 years.. wow. What will you do then? People always ask us that question. Yes mortgage is very costly and if people don’t know what’s going on behind the scenes they are sadly unaware of what the true cost of their home will be. Mr.CBB
Great post Mr CBB! I find it very motivating to use those calculators that tell you how much interest you save by making extra payments. Something as insignificant as $10 per week can have a great impact on the total interest repaid.
Hey Mate,
Just found your comment now. You and I both bought our homes at a very young age so you know as well as I that every penny counts when it comes to mortgages. You are a testament that with paying off your mortgage it opens up new opportunities. You are so young and are working on one of the biggest housing projects of anyone I know. You are an inspiration to many Pauline. Cheers!! CBB
Does anyone live in Toronto who paid off there mortgage in 5 years? It just doesn’t seem possible to pay off a $500,000 mortgage in 5 years.
I think it’s unfortunate that they don’t educate kids at a younger age on the basics of budget management and so many don’t know what a difference it makes to pay even those ten additional dollars every week. I personally don’t like debt and wanted to ensure I can pay off my mortgage as soon as possible. I went with RBC for my mortgage and I’m able to do 3 things with my mortgage: 1) increase weekly payments by 10% every year 2) put down an additional 10% one time payment during the year 3) double my payments as I wish
The reality is not everyone can take advantage of all three options at the same time (depends on your income, mortgage size, etc) but people need to see that even the smallest change in your payments can significantly reduce the life of the mortgage.
Hi Marta! I agree not everyone can take advantage of all the options BUT even the smallest extra payments that are made make a big difference. That is essentially what we did. I just finished writing a post on how to budget with your children and to teach them about money from a young age. I believe it is crucial for parents to recognize the importance of money-management and their children. Cheers! MR.CBB